ORGANISATION AND MANAGEMENT
MGT 1111
Centre for Professional Development and Lifelong Learning
UNIVERSITY OF MAURITIUS
ii
ORGANISATION AND MANAGEMENT
MGT 1111
SUPPORT MATERIALS
Centre for Professional Development and Lifelong Learning
UNIVER...
iii
Contributors
ORGANISATION AND MANAGEMENT – MGT 1111 was prepared for the
University of Mauritius. The Pro-Vice Chancel...
iv
TABLE OF CONTENTS
About the Course
Unit 1 Introduction to Management - Mrs R R Ramsaran Fowdar
Unit 2 The Evolution of ...
v
We strongly recommend that you read this section
before proceeding with the course.
ABOUT THE COURSE
ORGANISATION AND MA...
vi
A Student Reference Manual is distributed together with the support materials. This is a
valuable information source ai...
vii
HOW DO I USE THE SUPPORT MATERIALS?
Take a few minutes now to glance through the entire document to get an idea of its...
viii
SUGGESTED COURSE MAP
Week Unit Topic Tutorial Submission of
Assignment/
Class Test
1 Introduction to O & M Module 1
2...
ix
SUGGESTED ASSESSMENT CRITERIA
→ COURSE GRADING SCHEME:
Assignment: 15 marks
Class Test: 15 marks
Examination: 70 marks
...
x
6. Write down your ideas in a course journal. As you progress through the course,
the new information you absorb will st...
1
UNIT 1 INTRODUCTION TO MANAGEMENT
Unit Structure
1.0 Overview
1.1 Learning Objectives
1.2 The Meaning of Management
1.3 ...
2
1.0 OVERVIEW
This Unit introduces the concept of management and outlines the work of a manager.
This Unit includes a vid...
3
Warm-up activity
Peter is the manager of a branch of Pizza Hut. Jot down the duties which you think he has
to perform as...
4
others are more casually organised, like your neighbourhood football team. However, all
these organisations share three ...
5
An organisation must be organised and properly managed if it is to achieve its goals.
Now, let's look at the various def...
6
It is worth explaining the term 'efficiently' used by Robbins and the difference between
efficiency and effectiveness. M...
7
Activity 2
Define management.
8
1.3 MANAGEMENT FUNCTIONS
Management has been described above as a process whereby the resources of an
organisation are u...
9
LEADING
The next management function is that of leading. Leading involves influencing others to
engage in the work behav...
10
Activity 3
Some of Peter’s management activities are listed below. Tick the management
function that normally includes ...
11
1.4 THE IMPORTANCE OF MANAGEMENT
An organisation with access to materials, machines and manpower will fail if the most
...
12
Human skill refers to the ability to deal with other people. A manager must be able to
work with, communicate, understa...
13
1.6 TYPES OF MANAGERS
Managers can be classified in two ways:
(i) by their level in the organisation; for example, as f...
14
Top managers are managers at the very top levels of the hierarchy and are responsible
for the overall running of the or...
15
responsible for the direct implementation of the plans developed in conjunction with
middle management and for the smoo...
16
As shown in Figure 1.2, top management spends more time in planning, as they need to
define the objectives and policies...
17
1.6.2 Responsibility Area
Managerial jobs are also classified according to the nature of the responsibility involved.
A...
18
(1973) found that contrary to traditional views at that time that managers were reflective
and systematic planners,
• M...
19
organised sets of behaviour associated with a particular position. He argued that all
managers have formal authority ov...
20
goals by providing information, co-operation and support. These people can be
individuals or groups inside or outside t...
21
DECISIONAL ROLES
Decisional roles involve the making of strategic organisational decisions on the basis of
the manager'...
22
Evaluation of Mintzberg's role approach
Mintzberg acknowledged that his categorisation of the ten roles was somewhat an...
23
Activity 5-CASE STUDY
Jean Marc at Pizza Hut
The first branch of Pizza Hut (Mauritius) was opened in Port-Louis on 25 J...
24
responsibilities include staffing and the training of personnel, product development, menu
planning, product tasting, o...
25
upon him with respect because he deals with them in a professional manner and is
conversant with all the operations of ...
26
27
1.7.3 Agenda-Setting and Network-Building
Kotter (1982) studied the work of 15 successful American general managers in ...
28
manager therefore enjoys a degree of flexibility when setting his/her work agenda
which tends to reflect personal prefe...
29
Organisations are gradually recognising the importance of ethics and social
responsibility. Unethical practices harm th...
30
Controlling
Conceptual Skills
Effectiveness
Efficiency
First-Line Managers
Functional Managers
General Managers
Human S...
31
2. Which of the following is the ability to choose appropriate goals and to achieve
them?
A. Planning
B. Management
C. ...
32
7. Stoner et al. predicts that managerial work will be affected by several trends in the
future. Which of the following...
33
1.11 VIDEO SESSION
“MANAGEMENT AT WORK: THE MANAGERIAL WORLD”: EPISODE 1
Your answers to the following questions will b...
34
UNIT 2 THE EVOLUTION OF MANAGEMENT
Unit Structure
2.0 Overview
2.1 Learning Objectives
2.2 Historical Contribution to M...
35
2.0 OVERVIEW
This Unit reviews the major approaches to management which have emerged over the
past two centuries.
This ...
36
It must be noted, though that many management techniques have been prevalent ever
since ancient and medieval times. Aro...
37
2.3.1 Scientific Management
The concept of scientific management was originally put forward by Frederick Winslow
Taylor...
38
Time and Motion Study
His scientific approach to management was based on the "time and motion study",
which involved sc...
39
Scientific management contributed greatly to the spread of many factories in those days
due to its revolutionary approa...
40
Activity 1
Why did Taylor find it necessary to introduce a scientific approach to management?
2.3.2 Bureaucratic Manage...
41
Weber's Principles of Bureaucracy
Principle 1
Specialisation of labour
Description:
Each job should have a set of speci...
42
It must be noted though that these principles were first applied to large organisations
following the publication of We...
43
• Often led to the abuse of power and control since only a few people in the hierarchy
had authority. This, sometimes, ...
44
2.3.3 Administrative Management
The concept of administrative management was initially put forward by Henri Fayol, a
Fr...
45
in well-chosen places, in order to facilitate activities.
11. Equity Employees should be treated with kindness and just...
46
Barnard believed that this approach to management would nurture a willingness to co-
operate and ensure a clearly artic...
47
2.4 BEHAVIOURAL MANAGEMENT APPROACHES
As explained earlier the classical management approaches, and in particular scien...
48
Hawthorne Studies - Experiment 2
In this second set of experiments, five female workers were placed separately in a
Rel...
49
The Hawthorne Studies are regarded as a milestone in the behavioural movement.
However many authors have branded the Ha...
50
2.4.3 The Behavioural Science Approach
Though the human relations movement has contributed to management approaches by
...
51
2.5 QUANTITATIVE MANAGEMENT APPROACHES
Quantitative methods were initially adopted during World War II when military pl...
52
Management science has also contributed to the development of other quantitative tools
which facilitate linear programm...
53
2.6 CONTEMPORARY MANAGEMENT APPROACHES
As can be gathered above, classical, behavioural and quantitative management
app...
54
External Environment
Figure 2.1: The Organisational System
This approach allows managers to assess their organisation's...
55
2.6.3 Theory Z
Theory Z was put forward by William G. Ouchi after he studied the management
practices of Japanese and U...
56
2.6.4 Total Quality Management
The concept of quality control was initially put forward by the American W. Edwards
Demi...
57
2.7 KEY CONCEPTS
Scientific Management
Soldiering
Time and Motion Study
Differential Rate Systems
Bureaucratic Manageme...
58
2.8 VIDEO SESSION
“Intransition: The Changing, Challenging Environment”: Episode 2
1. In what terms did Taylor define e...
59
UNIT 3 PLANNING
Units Structure
3.0 Overview
3.1 Learning Objectives
3.2 Introduction
3.3 Planning
3.3.1 Benefits of Pl...
60
3.0 OVERVIEW
In Unit 3, we introduce you to organisational planning, decision-making and forecasting.
We highlight the ...
61
characterises today’s business environment, chances would have been better that
activities would have proceeded as plan...
62
3.3 PLANNING
All of us have been involved in “planning” in one way or the other, at home, at work, in
college, etc. We ...
63
targets. Put together planning is, therefore, a process that defines what the organisation
aims to achieve at some poin...
64
In essence, Planning:
- gives direction;
- enables predictability;
- enables adaptation to changes without crisis.
Acti...
65
(d) helps to think ahead systematically
(e) demands conscious co-ordination of projects and active participation and co...
66
The planning process typically produces several types of planning documents: strategic
plans, scenario plans and operat...
67
3.3.2.3 Operational Plans
Operational Plans specify how to accomplish the objectives defined broadly in the
strategic p...
68
3.3.3.2 Strategies
Strategies are statements of purpose to achieve a desired end:
• Follow on from determination of lon...
69
3.3.3.6 Programmes
A programme is normally a co-ordinated group of plans (goals, policies, procedures, and
budgets) for...
70
Figure 3.2
Activity 4
1. If you were Jack, what information would you require to answer the question from
the Chairman,...
71
3.4 OBJECTIVES
As explained earlier, the planning process results in a definition of objectives that an
organisation de...
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ORGANISATION AND MANAGEMENT

  1. 1. ORGANISATION AND MANAGEMENT MGT 1111 Centre for Professional Development and Lifelong Learning UNIVERSITY OF MAURITIUS
  2. 2. ii ORGANISATION AND MANAGEMENT MGT 1111 SUPPORT MATERIALS Centre for Professional Development and Lifelong Learning UNIVERSITY OF MAURITIUS
  3. 3. iii Contributors ORGANISATION AND MANAGEMENT – MGT 1111 was prepared for the University of Mauritius. The Pro-Vice Chancellor - Teaching & Learning acknowledges the contribution of the following persons from the Faculty of Law and Management, University of Mauritius: Course Authors: R Baichoo (Miss) Associate Professor M Boolaky Associate Professor D Gokhool D Lai Wai J A Peerally (Miss) R R Ramsaran Fowdar (Mrs) A Seebaluck I Vencatachellum Further editing: R R Ramsaran Fowdar (Mrs) August 2009 All rights reserved. No part of this work may be reproduced in any form, without the written permission from the University of Mauritius, Réduit, Mauritius.
  4. 4. iv TABLE OF CONTENTS About the Course Unit 1 Introduction to Management - Mrs R R Ramsaran Fowdar Unit 2 The Evolution of Management - Miss J A Peerally Unit 3 Planning - Dr M Boolaky Unit 4 Decision Making - Miss R Baichoo Unit 5 Organising - Mr D Lai Wai Unit 6 Motivation - Associate Professor D Gokhool Unit 7 Leadership - Mr I Vencatachellum Unit 8 Control - Mr A Seebaluck References Answers to “Additional Activities” Past Examination and Class Test Papers
  5. 5. v We strongly recommend that you read this section before proceeding with the course. ABOUT THE COURSE ORGANISATION AND MANAGEMENT (O&M)– MGT 1111 is a one semester course for both diploma and degree students from the five faculties of the University. Most of you will move into positions of management responsibility at some time in the first part of the twenty first century. What challenges will you face and how would you best be prepared to meet these challenges. O&M aims to provide you with an overview of the evolution and an understanding of the major theories and practices related to the management of organisations. This module will therefore enable you to understand the complex and demanding nature of managerial functions in yesterday’s, today’s and tomorrow’s work environments. HOW TO PROCEED SUPPORT MATERIALS The support materials contain no prescribed textbook. You might, however, find it useful to refer to the following textbooks: 1. Bartol, K.M., Martin, D., Tein, M. & Matthews, G., Management: a Pacific Rim Focus, (latest edition), McGraw-Hill, Australia. 2. Robbins, S., Management, (latest edition), Prentice-Hall International. 3. Boolaky, M., Gokhool D., Seebaluck A., (1999), Management: Concepts and Applications, Editions de L’Ocean Indien. A few copies of these books are available at the UOM Library. There is also a list of references – sources used for the preparation of the units- at the end the support materials. Feel free to consult these books to deepen your knowledge of management and also to prepare assignments.
  6. 6. vi A Student Reference Manual is distributed together with the support materials. This is a valuable information source aimed at helping you formulate your written assessment tasks. Video Sessions The course also includes a set of video programmes, Taking the Lead, the Management Revolution (1993), produced by INTELECOM, (USA) and acquired through the Mauritius College of the Air. The set includes the following episodes: Video Programmes (30 minutes each) Related to Unit in the support materials Episode 1: Management at Work: the Managerial World Unit 1: Introduction to Management Episode 2: In transition: The Changing, Challenging Environment Unit 2: The Evolution of Management Episode 14: All Systems Go: Motivating for Excellence Unit 6: Motivation Episode 16: At the Helm: Styles of Leadership Unit 7: Leadership You will not be viewing all episodes in one go but your tutor will be organising sessions for you as and when the relevant units are being covered in the support materials. For some units, your tutor has prepared a list of questions and issues that have to be borne in mind while viewing the video programmes. Be prepared to discuss your responses after the video viewing.
  7. 7. vii HOW DO I USE THE SUPPORT MATERIALS? Take a few minutes now to glance through the entire document to get an idea of its structure. Notice that the format of the different units is fairly consistent. For example, each unit begins with a UNIT STRUCTURE, an OVERVIEW and a list of LEARNING OBJECTIVES. The UNIT STRUCTURE identifies the main topics in the Unit. The OVERVIEW provides a brief introduction of the unit. You should then read the LEARNING OBJECTIVES. These objectives identify the knowledge and skills you will have acquired once you have successfully completed the study of a particular unit. They also show the steps that will eventually lead to the successful completion of the course and provide a useful guide for review. The ACTIVITIES sprinkled throughout the unit are designed to reinforce the learning objectives for each part of the course. Therefore, make sure that you complete all the activities and be prepared to discuss and share your answers with your tutor and peers. WHERE DO I BEGIN? You should begin by taking a look at the TABLE OF CONTENTS. The table provides you with a framework for the entire course and outlines the organisation and structure of the material you will be covering. The Suggested Course Map indicates how you should allocate your workload and what you should be working on in each week to be ready for the respective tutorial. As far as possible, stick to the Suggested Course Map to ensure that you are working at a steady pace and that your workload does not pile up.
  8. 8. viii SUGGESTED COURSE MAP Week Unit Topic Tutorial Submission of Assignment/ Class Test 1 Introduction to O & M Module 1 2 1 Introduction to Management 2 3 2 The Evolution of Management 3 4 3 Planning 4 5 4 Decision Making 5 6 Discussion on Units 1-4 6 7 Class Test End of Week 7 8 5 Organising 7 Submission of Assignment 9 6 Motivation 8 10 7 Leadership 9 11 Discussion on Units 5 - 7 10 12 Complete Assignment Date to be confirmed during the semester 13 8 Control 11 14 Discussion on Unit 8 12 15 Revision 13
  9. 9. ix SUGGESTED ASSESSMENT CRITERIA → COURSE GRADING SCHEME: Assignment: 15 marks Class Test: 15 marks Examination: 70 marks CLASS TEST: Scheduled for Week 7 → FINAL EXAMINATIONS: • Scheduled and administered by the Registrar’s Office • A two-hour paper at the end of the semester. STUDY TIPS 1. Organise your time. It is best to complete each assigned reading in one sitting. The logical progression of thought in a chapter/unit can be lost if it is interrupted. 2. Be an active reader. Use question marks to flag difficult or confusing passages. Put exclamation marks beside passages you find particularly important. Write short comments in the margins as you go. For example, if you disagree with an author’s argument or if you think of examples which counter the position presented, note your opinions in the margin. If you prefer to leave your book pages unmarked, you can make your notations on “post-it-notes”. 3. Read critically. You must evaluate, as well as appreciate and understand, what you read. Ask questions. Is the author’s argument logical? Are there alternatives to the author’s explanations or to the conclusions drawn? Does the information fit with your experience? 4. Take notes. If you make notes on an article or chapter right after finishing it, you reap a number of benefits. First, note-taking allows you an immediate review of what you have just read. (You will find that this review helps you recall information). Second, it gives you an opportunity to reassess your flagged or margin comments. Finally, it gives you a second shot at deciphering any confusing passages. 5. Review your scribbling! Whether or not you make separate notes on your readings, review your flags, underlining and marginalia. Study closely those passages you considered significant or difficult.
  10. 10. x 6. Write down your ideas in a course journal. As you progress through the course, the new information you absorb will stimulate new thoughts, questions, ideas, and insights. These may not be directly related to the subject matter, but may be of great interest to you. Use these ideas to focus your personal involvement in this and other courses. 7. Your ability to explain the subject matter to others is a good test of your true comprehension of the material. Try explaining the material you are learning to others, classmates or friends, without resorting to jargon. Even if some of them are not directly involved with the techniques discussed in this course, many of the concepts may be of interest to them. 8. Activities found in units will not be marked. We strongly recommend that you do not skip any of them. They will help you prepare for the graded assignments. Now, it’s time to get to work. Good luck and enjoy the course!
  11. 11. 1 UNIT 1 INTRODUCTION TO MANAGEMENT Unit Structure 1.0 Overview 1.1 Learning Objectives 1.2 The Meaning of Management 1.3 Management Functions 1.4 The Importance of Management 1.5 Management Skills 1.6 Types of Managers 1.6.1 Management Levels 1.6.1.1 Management Levels and Functions of Management 1.6.1.2 Management Levels and Skills 1.6.2 Responsibility Area 1.7 What Managers Actually Do 1.7.1 Work Methods 1.7.2 Managerial Roles 1.7.3 Agenda-Setting and Network-Building 1.8 The Challenge of Management 1.9 Key Concepts 1.10 Additional Activities 1.11 Video Session
  12. 12. 2 1.0 OVERVIEW This Unit introduces the concept of management and outlines the work of a manager. This Unit includes a video session. Refer to the Study Guide. 1.1 LEARNING OBJECTIVES After you have successfully completed this Unit, you should be able to do the following: 1. Define management. 2. Explain the four functions of management. 3. Discuss the importance of management. 4. List the three skills, which an effective manager requires. 5. Describe the various management levels in a large organisation. 6. Explain how managerial work differs according to hierarchical level and responsibility area. 7. Discuss how the importance of management functions and the skills needed by managers vary at different levels of the hierarchy. 8. Describe the ten major roles performed by managers and evaluate Mintzberg's role approach. 9. Explain the aims of agenda setting and network-building and identify the factors which influence a manager's work agenda. 10. Explain how vision, ethics, respect for cultural diversity and training can help people meet the challenge of management.
  13. 13. 3 Warm-up activity Peter is the manager of a branch of Pizza Hut. Jot down the duties which you think he has to perform as the manager of a pizzeria. Your answers will be discussed in the tutorial. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 1.2 THE MEANING OF MANAGEMENT The task of management is to get work done through other people in order to achieve the goals and objectives of organisations. An organisation can be defined as a systematic arrangement of two or more people who work together to achieve a specific goal or set of goals. While some organisations are structured in a very formal way, such as Happy World Foods Ltd., Mauritius College of the Air, Air Mauritius Ltd. and the Ministry of Labour,
  14. 14. 4 others are more casually organised, like your neighbourhood football team. However, all these organisations share three common characteristics (Robbins 1988): (i) Each has a distinct purpose which can be expressed in terms of a goal or set of goals. For instance, the goal of the University of Mauritius is to provide quality tertiary level education to students, and the goal of the neighbourhood football team is to do its best to win all football matches played with rival teams. (ii) Each is composed of people. (iii) Each develops a structure that defines and limits the behaviour of its members. For example, rules and regulations are created, and tasks and responsibilities are assigned. Activity 1 Does Pizza Hut satisfy the basic criteria underlying the concept of an organisation? Elaborate on your answer.
  15. 15. 5 An organisation must be organised and properly managed if it is to achieve its goals. Now, let's look at the various definitions of management. 'Management is the art of getting things done through other people.' Mary Parker Follett 'Management refers to the process of getting activities completed efficiently, with and through other people.' Stephen Robbins 'To manage is to forecast and plan, to organise, to command, to coordinate and to control.' Henri Fayol 'Management is the process of achieving organisational goals through engaging in the four major functions of planning, organising, leading and controlling.' Kathryn Bartol et al. 'Management is the process of planning, organising, leading and controlling the work of organisation members and of using all available organisational resources to reach stated organisational goals.' James Stoner et al. The above definitions are extremely broad. Follett's definition highlights the social nature of management and indicates that managers achieve organisational goals by allocating and delegating the required tasks to employees and not by performing the tasks themselves. This definition is not adequate of course and this is recognised in Robbins' definition of management where it is said that managers work in collaboration with other people.
  16. 16. 6 It is worth explaining the term 'efficiently' used by Robbins and the difference between efficiency and effectiveness. Managerial performance in an organisation comprises two dimensions: effectiveness and efficiency (Drucker 1967). Effectiveness is 'the ability to choose appropriate goals and to achieve them' (Bartol et al. 1997), that is doing the right thing. Effectiveness can therefore be divided into two parts: first, choosing the right goals and second, achieving these goals. Efficiency is 'the ability to make the best use of available resources at minimum cost in the process of achieving goals (Bartol et al. 1997), that is doing things right. Efficiency is basically an 'input-output' concept. An efficient manager is one who achieves more output or results from a given input (such as materials, money, labour, equipment) or the same output from less input (Robbins 1994). Efficient managers should therefore minimise the cost of resources. The word 'process' in the definitions by Bartol et al. and Stoner et al. indicates that managerial activities are carried out in a systematic way. All managers achieve their goals by engaging in the four main functions of planning, organising, leading and controlling. It is on these functions that management activity is based. Therefore, they are used as a framework by which management is studied. It is useful to note that the term 'command' in Fayol's view of management is being replaced by the term 'lead' in the definitions propounded by contemporary authors.
  17. 17. 7 Activity 2 Define management.
  18. 18. 8 1.3 MANAGEMENT FUNCTIONS Management has been described above as a process whereby the resources of an organisation are used to achieve organisational objectives. The traditional approach, which is used to examine this process, is to condense it down to planning, organising, leading and controlling activities (called the POLC approach). These four functions are interrelated and are equally important in achieving the organisation's goals. For instance, a manager cannot just do the planning and ignore the other aspects. Although these four functions do not tell the whole story about what constitutes management, they are a convenient way of describing most of the key aspects of the work of managers in practice (Cole 1996). Let's now describe these four functions in detail. PLANNING Planning is usually listed as the first function of management. This is because we must have a plan before we can organise. Planning can be defined as the management function which involves setting the company's goals and then determining the means to achieve these goals, or in other words, deciding how best to achieve them. In simpler terms, we must first decide what to do and then find out how to do it. As you can see, planning involves decision-making and therefore, this support materials shall address both these elements in detail in Unit 3 - Planning and Unit 4 - Decision-Making respectively. ORGANISING Organising is the management function which focuses on arranging and allocating work, authority, and resources among an organisation's members so that plans may be successfully carried out. This function involves the setting up of an organisational structure whereby work is allocated, lines of authority and responsibility defined, and a system of rules and regulations which guide the conduct of employees laid down. This structure should constantly change to suit the organisation's needs. The organising function will be examined in more detail in Unit 5 - Organising.
  19. 19. 9 LEADING The next management function is that of leading. Leading involves influencing others to engage in the work behaviours necessary to reach organisational goals (Bartol 1997). The manager must communicate with his/her subordinates, explain his/her plans to them, and lead and motivate them to exert their maximum efforts to achieve the goals. Key aspects of motivation and leadership will be dealt with in Unit 6 - Motivation and Unit 7 - Leadership. CONTROLLING Controlling is the management function aimed at regulating organisational activities so that actual performance will conform to expected organisational standards and goals (Bartol 1997). Therefore, the controlling function consists of three steps: (i) Establishing a standard or target, (ii) Measuring current performance and comparing it with the standard, and (iii)Taking corrective actions if deviations are detected. This function will be discussed in more detail in the Unit 8 - Control.
  20. 20. 10 Activity 3 Some of Peter’s management activities are listed below. Tick the management function that normally includes each activity. ACTIVITY Planning Organising Leading Controlling 1. Deciding to open a take-away counter. 2. Assigning job duties. 3. Communicating to employees about new pay incentives. 4. Deciding to increase the price of pizzas. 5. Checking that pizzas are prepared on time. 6. Hiring new cooks. 7. Checking menu cards to ensure that correct prices are being charged. 8. Monitoring opening and closing schedules. 9. Instituting an employee- suggestion scheme. 10. Appointing a marketing manager to take charge of sales.
  21. 21. 11 1.4 THE IMPORTANCE OF MANAGEMENT An organisation with access to materials, machines and manpower will fail if the most important element is missing- the ability to efficiently use these resources. Many businesses have failed because of mismanagement. Some call it bad planning, others blame it on lack of foresight or even bad luck. In our country, some well-known examples of mismanaged companies include Litra Co. Ltd., MCCB Ltd., Howard and Sang Furniture Ltd., Super Centre and recently, H. Teeluck & Sons Ltd. These testify to the importance of proper management. Resources can only be put to proper use by an efficient manager. In the words of Peter Drucker (1989), "The responsibility of management in our society is decisive not only for the enterprise itself but for management's public standing, its success and status, for the very future of our economic and social system and the survival of the enterprise as an autonomous institution". 1.5 MANAGEMENT SKILLS Robert Katz has identified three basic types of skills that make up effective management: technical, human and conceptual skills. Technical skill is the ability to use the procedures, techniques and knowledge of a specialised field (Stoner et al. 1994). This skill may be acquired through education, training or experience. The sales manager, for example, must be familiar with marketing techniques, the products of his company, and the tastes of his customers, his sales territories and the distribution network.
  22. 22. 12 Human skill refers to the ability to deal with other people. A manager must be able to work with, communicate, understand and motivate others, both as a member of a group and as a leader who gets things done through others. Conceptual skill is the mental ability to see the overall picture and to understand how one part is related to the others. It is an important skill because a manager must be able to understand how, for instance, his actions can affect other departments, or how environmental influences can affect the organisation. We shall see in section 1.6.1.2 how the required mix of these three skills varies according to the manager's rank in the organisation. Activity 4 It has been said that good managers are born, and as such management skills cannot be acquired. Discuss this statement.
  23. 23. 13 1.6 TYPES OF MANAGERS Managers can be classified in two ways: (i) by their level in the organisation; for example, as first-line, middle or top managers and (ii) by the range of organisational activities for which they are responsible; for example, as functional or specialist managers and general managers. 1.6.1 Management Levels The various levels of management in a large organisation form the management pyramid as illustrated in Figure 1.1. Figure 1.1. The Management Pyramid TOP MANAGEMENT Board of Directors Chief Executive Officer Managing Director President MIDDLE MANAGEMENT Department Head FIRST-LINE MANAGEMENT Supervisor
  24. 24. 14 Top managers are managers at the very top levels of the hierarchy and are responsible for the overall running of the organisation. Typical titles of top managers include chief executive officer, president, and chairman of the board of directors, managing directors and general manager among others. Top managers develop overall plans for the company and make major decisions such as whether the company should expand its operations or whether new products should be launched. Top management has to work to some extent with the upper layers of middle management in implementing the plans. They also oversee organisational progress and spend much time in understanding how changes in the business environment can affect the company's operations. Middle managers, also referred to as tactical managers (see Unit 3) are managers below the top levels of the hierarchy and are directly responsible for the work of first-line managers and sometimes for that of operating employees as well. Operatives or operating employees work directly on a task or job and do not hold the responsibility of monitoring the work of others while a manager's work includes directing the activities of other people. A computer engineer is an example of operating personnel. Middle managers include plant managers, divisional, department or section heads. They are responsible for working out detailed plans and procedures in line with the overall plans laid down by top management. Middle managers are frequently part of several layers of the hierarchy in large organisations. Since the 1980s however, there is a trend towards fewer layers of middle managers in order to reduce costs, improve communication and to push decision-making closer to the operating level. As a result of this trend, the pressure on the remaining middle managers is higher since they now have to share more work and responsibility. First-line managers are managers at the lowest level in an organisation. They direct the work of operating employees only: they do not supervise the work of other managers. First-line managers are sometimes called supervisors. Examples of first-line managers include foreman, production supervisors in a manufacturing plant, technical supervisors in a repair shop, or floor sale supervisors in a departmental store. These managers are
  25. 25. 15 responsible for the direct implementation of the plans developed in conjunction with middle management and for the smooth running of day-to-day operations. Research predicts that the autonomy and influence of first-line supervisors are likely to decline due to • increasing worker participation in workplace management, a trend towards work teams, • increased use of computers to track activities formerly monitored by first-line managers and, • increasing number of specialists who provide advice and direction to work areas involving sophisticated technology in particular (Bartol 1997) 1.6.1.1 Management Levels and Functions of Management No matter what title or position they hold, managers at all three levels on the pyramid perform the same functions of planning, organising, leading and controlling in trying to achieve the organisational goals. However, research demonstrates that the four functions of management are used in different proportions across the levels of management. Figure 1.2. Management Functions at Different Levels Planning Organising Leading Controlling First-line Middle Top Managers Managers Managers
  26. 26. 16 As shown in Figure 1.2, top management spends more time in planning, as they need to define the objectives and policies of the whole organisation. Organising is more important for top and middle managers because they are the ones who are mainly responsible for allocating and arranging resource. Leading, on the other hand, is more important for first-line managers because they have to provide leadership support to the workers and communicate with them. In contrast, controlling is most similar at all levels since the monitoring of activities has to be done at all levels. 1.6.1.2 Management Level and Skills The importance of each of the key management skills depends on the manager’s rank in the organisation. For first-line managers, technical skill is more important as they need to deal directly with the daily operation-related problems requiring specific solutions. Technical skill becomes less important as a manager moves up the management pyramid. In contrast, conceptual skills are most important for the top manager since he/she must understand the overall picture. Finally, human skill is equally important for managers at all levels because all managers must understand and work with people. Figure 1.3. Management Skills at Different Levels Technical skills Conceptual skills Human skills First-line Middle Top managers managers managers
  27. 27. 17 1.6.2 Responsibility Area Managerial jobs are also classified according to the nature of the responsibility involved. A functional manager is responsible for only one organisational activity or specialised area of the organisation such as production, marketing, finance or human resources. A general manager is responsible for a whole organisation or a complex sub-unit of the organisation such as a company, subsidiary or independent division and is responsible for all the activities of that unit such as marketing, production, accounting or engineering. Depending on circumstances, general managers can be called the president or the division manager or by other titles. Large organisations usually tend to have more than one general manager. 1.7 WHAT MANAGERS ACTUALLY DO According to the functional approach, managers plan, organise, lead and control. But is this what managers actually do? In the broad sense, yes: managers do plan, organise, lead and control. However, if we look at how managers actually spend their time, we would come to interesting conclusions about their work methods, the various roles that they have to play and the importance of agenda-setting and network-building to them. 1.7.1 Work Methods Over the past two decades, many studies have been conducted in an attempt to move away from the classical view of the activities of management (see Unit 2 for further explanations on the classical view of management) towards a more detailed and behaviour-oriented analysis of the actual work methods of managers. Based on a study of the work of five chief executives of medium to large organisations, Henry Mintzberg
  28. 28. 18 (1973) found that contrary to traditional views at that time that managers were reflective and systematic planners, • Managers worked at an unrelenting pace, that is, they started working at the very moment they arrived at the office until leaving at night. Coffee and lunch were usually taken during formal or informal meetings. Everyday, the managers had to deal with an average of 36 pieces of mail and other matters. • The work of managers was characterised by variety, brevity and fragmentation. Indeed, the managers had to handle a variety of matters throughout the day and many of these activities were brief since half of them lasted less than nine minutes. The managers would also be constantly interrupted by telephone calls and by subordinates wishing to talk to them. Therefore, there was little time for reflective thinking during the office hours and many managers even had to think about planning at home. • The managers relied much on verbal contacts and networks. They preferred having phone conversations and informal and formal meetings rather than writing memos and reports. The CEOs also depended on their managerial networks for the exchange of information. Networks are sets of co-operative relationships with other people such as subordinates and peers, and individuals and groups both inside and outside the organisation. Such networks were considered essential for managers to have influence and operate effectively. Mintzberg's research focused on the work of CEOs. However, other researchers have observed that the findings of Mintzberg's study characterise the work of managers at all three levels of the hierarchy. 1.7.2 Managerial Roles Mintzberg's study of the work of the five CEOs led him to conclude that the activities of a manager can be classified into a set of ten different but closely interrelated roles or
  29. 29. 19 organised sets of behaviour associated with a particular position. He argued that all managers have formal authority over the unit they command and derive a special position of status from that authority. This status causes managers to be involved in interpersonal relationships with other people who, in turn, provide the managers with the information they need to make decisions. The ten managerial roles can thus be classified into three main groupings: interpersonal roles, informational roles and decisional roles as follows: Interpersonal roles Informational roles Decisional roles Figurehead Monitor Entrepreneur Leader Disseminator Disturbance handler Liaison Spokesperson Resource allocator Negotiator INTERPERSONAL ROLES The interpersonal roles arise from the manager's authority and status and involve the development and maintenance of positive relationships with other people. (i) Figurehead As a figurehead, the manager has to perform ceremonial duties as head of the unit, such as signing legal documents, participating in subordinates' weddings, or taking clients to dinner. (ii) Leader The leader role involves the responsibility for the staffing and for the training, motivation and guidance of subordinates. (iii)Liaison Just like politicians, managers must build interpersonal relationships or networks with people outside their unit who can help them achieve their organisation's
  30. 30. 20 goals by providing information, co-operation and support. These people can be individuals or groups inside or outside the organisation. INFORMATIONAL ROLES Informational roles involve the reception and transmission of information arising from the manager's interpersonal roles. The three informational roles performed by managers are the monitor, disseminator and spokesperson roles. (i) Monitor This role identifies the manager as seeking and receiving information both internally and externally, which enables the manager to develop thorough understanding of the working of the organisation and its environment. Managers can also collect information through personal contacts or by reading newspapers, magazines and reports for example. (ii) Disseminator The disseminator role involves internal transmission of information received either from outsiders or from other subordinates to organisational members. Transmission of information internally can be conveyed through staff meetings, notice boards, by making phone calls and/or through the writing of memos. The information may be factual or may be based on the manager's judgement of events. (iii)Spokesperson Managers also transmit information on the organisation's plans, policies, actions and results to people outside their own units, such as the board of directors and other superiors, and the general public such as customers, government departments, suppliers and the press.
  31. 31. 21 DECISIONAL ROLES Decisional roles involve the making of strategic organisational decisions on the basis of the manager's status and authority, and access to information. (i) Entrepreneur As entrepreneurs, managers plan and initiate projects to bring about change and innovation to improve the performance of their unit and organisation. (ii) Disturbance handler As a disturbance handler role, the manager takes corrective action in response to previously unforeseen problems such as strikes, financial difficulties or change in government policy. In such situations, managers can, for instance, devise a strategy and set up committees that deal with disturbances and crises. (iii)Resource allocator As resource allocators, managers are responsible for the distribution of the organisation's resources such as money, time, equipment, staff and materials among organisational members. (iv)Negotiator The negotiator role relates to participation in negotiation activities with outside organisations (for example when negotiating a contract with suppliers) or with individuals working for the same organisation (for instance when bargaining about working terms and conditions with the trade union). Negotiation plays an important part of the manager's job because of his/her authority, responsibility and knowledge of information.
  32. 32. 22 Evaluation of Mintzberg's role approach Mintzberg acknowledged that his categorisation of the ten roles was somewhat an arbitrary division of the manager's activities. It presented only one of the many possible ways of classifying the managerial roles. In practice, the ten roles are not isolated but they form an integrated whole. The effectiveness of the manager's performance is affected if any of the roles is removed. A number of studies support Mintzberg's view that this set of ten roles is common to the work of all managers in different organisations and at different levels of the hierarchy. However, the importance of the roles varies according to the hierarchical level. For instance, the leader role is more important at the lower level of the hierarchy while the roles of figurehead, liaison, disseminator, spokesperson and negotiator are more important at the higher levels. Mintzberg's model of managerial roles is a realistic approach to classifying the actual activities of managers and provides clues to the skills they require in order to carry out their work effectively. However, this model has been criticised. For example, Griffin (1984) found that activities involved in figurehead, disseminator, disturbance handler and negotiator were not separate roles but overlapped considerably with activities of the six other roles. Viewing management as playing roles is complementary to describing the functions of management. Each of the functions of planning, organising, leading and controlling may require any combination of roles; each role may involve any combination of functions. The two are different perspectives of the same thing. For instance, the three interpersonal roles are part of the leading function; planning, on the other hand, involves the allocation of resources and the transmission of information.
  33. 33. 23 Activity 5-CASE STUDY Jean Marc at Pizza Hut The first branch of Pizza Hut (Mauritius) was opened in Port-Louis on 25 July 1993. Since then, the restaurant has known a huge success. The Mauritian scene now counts three other branches of Pizza Hut and there is no doubt that it is the No.1 pizzeria in Mauritius today. According to Jean Marc Ah-Foo, Operations Manager at Pizza Hut, the secret behind this success is due to the company's respect for procedures and standards as regards QSCH (Quality, Service, Cleanliness, Hospitality). When the first branch opened at Happy World House, there was a big craze for its pizzas during the first two months. The kitchen had to run for 24 hours for the preparation of fresh dough since the restaurant was open from 10.00 a.m. to 10.00 p.m. The opening of this first pizzeria initiated the 'pizza culture' in Mauritius. At first, there was no big competition in the pizza market, but then competition started earlier than expected with small pizzerias opening all over the island. Pizza Hut therefore decided to create "brand awareness" by having recourse to advertising and other promotional activities. It also made its restaurant more accessible to people by opening new branches with home delivery facilities. Jean Marc initially worked as a waiter after having followed a course in 'Restaurant and Housekeeping' at the Hotel School of Mauritius. After ten years spent in the hotel industry, he was appointed as the first Restaurant Manager at Pizza Hut. The company then provided him with the opportunity to follow courses in computer programming, time management, hygiene and finance. This enabled him to upgrade his management skills along with on-the-job training. He is now the Operations Manager and as a middle manager, is responsible for directing the activities of the four Restaurant Managers and is accountable to the General Manager. Unlike the four Restaurant Managers, Jean Marc does not spend his days in the same office. Every week he visits the Head Office at Coromandel and all the four branches of Pizza Hut on specific days to ensure they are operating smoothly. His main
  34. 34. 24 responsibilities include staffing and the training of personnel, product development, menu planning, product tasting, ordering of overseas products, handling of customer complaints, liaising with the overseas business support manager located in India (home office overseeing Pizza Hut operations in Mauritius) and managing the overall organisation of the business. He also looks after the administrative side by supervising stock levels and monitoring food costs. Planning plays an important role in Jean Marc's job. Ordering of overseas products, sales forecasts and allocation of budget for promotional activities are usually carried out one year in advance. Rosters for all the management team and outings for staff are also prepared beforehand. Specific tasks are delegated to each of the staff in all the four branches; regular meetings are scheduled with managers, employees and cashiers respectively once a month to exchange information and to discuss on events which happened during the month. Jean Marc believes that such meetings help to prevent communication problems among organisational members. As far as his relationship with the staff is concerned, Jean Marc tries to be friendly and shows concern for his subordinates. In fact, he hates using the word 'subordinates' and entertains a cordial relationship with his personnel. Jean Marc sometimes even visits parents of female staff to reassure them that working at Pizza Hut is safe at night and that their daughters will be safely dropped at home by the company vehicle. He also attends weddings and funerals of staff. To motivate the personnel, the company gives special incentives for working on Sundays and management tries to be flexible when planning rosters. Jean Marc also tries to develop new ways of upgrading service, motivating staff, launching new products and reviewing the design of the restaurants. He recalls having high levels of absenteeism during the riots of February 1999 in the country when the restaurants had to remain closed for two days for security reasons. Jean Marc's staff look
  35. 35. 25 upon him with respect because he deals with them in a professional manner and is conversant with all the operations of the business. However, when it comes to the 'controlling' function, Jean Marc acknowledges that he has to be strict on control procedures. In fact, he has adopted the principle 'main de fer dans des gants de velours' or otherwise his personnel will not respect the company's rules and standards. Many control procedures have been implemented at Pizza Hut such as the daily stock count of bottles, monitoring of cash and stock losses and audit of food costs. Any variances have to be reported to him. The respect for quality is especially important at Pizza Hut. At the branch in the Phoenix Commercial Centre, for instance, pizza slices are thrown away if they have not been sold after 20 minutes! Jean Marc also relies on his network of contacts to achieve organisational goals. He often talks to friends or other managers in Happy World Ltd. to share ideas and to look for information. For instance, he can contact the manager at the cargo department to know what has happened to his goods; or at the computer department if there is a problem with a computer. Sometimes, if his friends make complaints about the service at Pizza Hut, he acts upon such information. Occasionally, the company contracts the services of a specialised firm in marketing research to establish customers' profiles which it can target. Competitive shopping is usually carried once in a month to identify the most suitable suppliers of local materials in terms of prices and quality. Jean Marc also tries to negotiate with the existing suppliers from time to time to obtain discounts and gifts for his staff for the end-of-year party or to have better quotes for their uniforms. Question Consider Mintzberg's managerial roles and identify which of the roles Jean Marc undertakes as part of his job as Operations Manager of Pizza Hut.
  36. 36. 26
  37. 37. 27 1.7.3 Agenda-Setting and Network-Building Kotter (1982) studied the work of 15 successful American general managers in nine different organisations involved in a broad range of industries. He found that the managers had two significant activities in common: agenda-setting and network-building, despite the fact that their jobs differed and the way they handled their work was different. AGENDA-SETTING A work agenda is a set of tentative goals and tasks that a manager is trying to accomplish in order to bring about desired end-results. Kotter suggested that managers focus their efforts through the use of work agendas. A work agenda can be developed for a period of one month or more and has to be reviewed constantly due to changing circumstances. Stewart (1982) identified three factors which influence a manager's work agenda: (i) Job demands are what the jobholder has to do. Some responsibilities of the jobholder cannot be delegated: for example, attending meetings; meeting minimum criteria of performance which is expected of the manager, for instance the manager's department should achieve a 30 per cent increase in turnover by the end of the year. (ii) Job constraints are internal or external factors which limit what the manager can do: for example, resource limitations, technological limitations, union activity, attitudes of other people and geographical location. (iii) Job choices are activities that the manager can do but does not have to. A manager usually has the choice to do different work from another manager, or to do the work in a different manner. For instance, a manager can opt to do part of the work and delegate the rest of the work to others or he/she can choose to participate to a greater extent in public relations activities than another manager would. A
  38. 38. 28 manager therefore enjoys a degree of flexibility when setting his/her work agenda which tends to reflect personal preferences, job demands and constraints, and career objectives of individual managers (Bartol 1997). NETWORK-BUILDING As explained in sub-section 1.7.1, networks involve the manager establishing co- operative relationships with people both inside and outside the organisation. The aim of network-building is to establish and maintain contacts which would be helpful to the manager to achieve the goals set on the agenda. 1.8 THE CHALLENGE OF MANAGEMENT The world economy is becoming fiercely competitive, turbulent and unstable. Stoner et al. (1994) argue that effective managers will need vision, ethics, respect for cultural diversity and training to meet the challenges of global competition. (i) The need for vision Managers have to develop a sense of vision and have to predict what will happen to their organisation in the longer-term. They also have to anticipate problems, identify and exploit opportunities which will allow the organisation to grow and prosper. (ii) The need for ethics Ethics are standards of conduct and moral judgement differentiating right from wrong (Bartol 1997). With the increasing pressure from competition, is it ethical for an organisation to pay bribes; or is it ethical to pollute the environment if this helps the company to reduce its production costs and hence the price of its products to its customers?
  39. 39. 29 Organisations are gradually recognising the importance of ethics and social responsibility. Unethical practices harm the interests of stakeholders and will eventually hinder the organisation from achieving its goals. (iii) The need for cultural diversity With global competition and more companies likely to be doing business in other countries, managers will need to be familiar with international business and different cultures. Moreover, employees should be treated equitably and fairly, regardless of their racial, cultural or sexual differences. (iv) The need for training Managers have to continually upgrade their management skills through formal education or ongoing practice to maintain high levels of productivity and to keep pace with new technology. Activity 6 Discuss in small groups the extent to which organisations in Mauritius are meeting the four challenges of management mentioned above. You may illustrate your case by citing an organisation of your group's choice. 1.9 KEY CONCEPTS Agenda
  40. 40. 30 Controlling Conceptual Skills Effectiveness Efficiency First-Line Managers Functional Managers General Managers Human Skills Leading Management Middle Managers Networks Organisation Organising Planning Roles Technical Skills Top Managers Work Methods 1.10 ADDITIONAL ACTIVITIES A: MULTIPLE CHOICE QUESTIONS: Encircle the correct answer. 1. Which of the following is NOT one of the major functions of management? A. Controlling B. Planning C. Leading D. Selling
  41. 41. 31 2. Which of the following is the ability to choose appropriate goals and to achieve them? A. Planning B. Management C. Efficiency D. Effectiveness 3. Leading is the management function that involves A. setting goals B. allocating resources C. communicating to subordinates D. regulating activities 4. Which of the following is NOT a key management skill? A. Human skill B. Technical skill C. Conceptual skill D. Entrepreneurial skill 5. The set of goals which a manager is trying to accomplish is called A. an action plan B. a work agenda C. a slogan D. a mission statement 6. Which of the following is NOT an informational role? A. Spokesperson B. Disseminator C. Monitor D. Liaison
  42. 42. 32 7. Stoner et al. predicts that managerial work will be affected by several trends in the future. Which of the following is NOT one of them? A. Managers will be more concerned with ethics B. There will be an increasing use of information technology in the future C. Organisations will grow in size D. Organisations will have to assume an international perspective B: TRUE OR FALSE ? 1. An organisation is two or more persons engaged in a systematic effort to produce goods and services. 2. The management function of organising involves the regulation of organisational activities. 3. Top managers are more concerned with the leading function than are managers at other levels. 4. Middle managers utilise human, conceptual and technical skills in somewhat equal proportions. 5. A general manager has responsibility for only one functional area. 6. First-line managers are mostly responsible for the day-to-day operations of the organisation. 7. The monitor role as identified by Mintzberg involves the responsibility of controlling the organisation's operations.
  43. 43. 33 1.11 VIDEO SESSION “MANAGEMENT AT WORK: THE MANAGERIAL WORLD”: EPISODE 1 Your answers to the following questions will be discussed in the tutorial after you have viewed the video: 1. List the functions of management. 2. Which changes in the business environment are likely to have an impact on management in the future? 3. According to the video, what does ‘total quality management’ mean and how does it work? 4. Why do middle managers represent an ‘endangered species’?
  44. 44. 34 UNIT 2 THE EVOLUTION OF MANAGEMENT Unit Structure 2.0 Overview 2.1 Learning Objectives 2.2 Historical Contribution to Management 2.3 Classical Management Approaches 2.3.1 Scientific Management 2.3.2 Bureaucratic Management 2.3.3 Administrative Management 2.4 Behavioural Management Approaches 2.4.1 The Hawthorne Studies 2.4.2 The Human Relations Movement 2.4.3 The Behavioural Science Approach 2.5 Quantitative Management Approaches 2.5.1 Management Science/Operations Research 2.5.2 Operations Management 2.5.3 Management Information Systems 2.6 Contemporary Management Approaches 2.6.1 Systems Theory 2.6.2 Contingency Theory 2.6.3 Theory Z 2.6.4 Total Quality Management 2.7 Key Concepts 2.8 Video Session
  45. 45. 35 2.0 OVERVIEW This Unit reviews the major approaches to management which have emerged over the past two centuries. This Unit includes a video session. Refer to the Study Guide. 2.1 LEARNING OBJECTIVES After you have successfully completed this Unit, you should be able to do the following: 1. Compare the different classical approaches to management as well as appreciate their contributions and limitations. 2. Recognise the important early management writers. 3. Assess the contributions of the major theories in the behavioural management approach. 4. Identify the major components of the quantitative management approach. 5. Explain the emergence of the different contemporary management approaches. 6. Identify the relationships among the various classical management approaches and the contemporary approaches. 2.2 HISTORICAL CONTRIBUTION TO MANAGEMENT As you have seen from Unit 1, management usually entails four main activities namely planning, organising, leading and controlling. Management theories and principles, as we know them today, have emerged through a gradual evolutionary process which took place over the past two centuries. In fact the first business and management programmes were offered by the Wharton School at the University of Pennsylvania in 1881 (Bateman et al., 1990).
  46. 46. 36 It must be noted, though that many management techniques have been prevalent ever since ancient and medieval times. Around 5000 BC, for example, the Sumerians devised a method of record keeping to monitor and control their activities. Egyptians also were known for their ability to plan, organise and control which made the construction of pyramids, by over 100,000 slaves, possible. The Chinese have been practising five management functions, namely planning, organising, staffing, leading and controlling as early as 1100 BC. Even the Roman Empire, both before and after the birth of Christ, relied heavily upon decentralised management systems in order to sustain its reign (Bateman et al., 1990). However attempts to develop formal management theories are more recent and were spurred on by the industrial revolution in the United States from the early 18th Century. The different phases in the evolution of management can be classified as follows: 1. Classical management approaches 2. Behavioural management approaches 3. Quantitative management approaches 4. Contemporary management approaches 2.3 CLASSICAL MANAGEMENT APPROACHES The classical management movement began around the 1870s and this school of thought refers to three main management styles which are: 1. Scientific Management 2. Bureaucratic Management 3. Administrative Management
  47. 47. 37 2.3.1 Scientific Management The concept of scientific management was originally put forward by Frederick Winslow Taylor. As a matter of fact, Taylor's contribution to this management viewpoint has been so significant that he has been unanimously accepted as "the father of scientific management". Many authors also refer to scientific management as "Taylorism". Hired by the Midvale Steel Co. in 1878 as an engineer, Taylor made two crucial observations on management and workers’ attitudes towards their responsibilities. Taylor’s Observations Management's Attitude • Midvale's management exigency on workers to be more productive while, at the same time, its reluctance to pay for higher wages. Hence management's objective was that of "maximum production for minimum pay"(Bateman & al., 1990). Workers' Attitude • Workers deliberate practice of restricting productivity by engaging in systematic soldiering. In other words the workers' main objective was that of "working at less than full capacity" (Bartol & al., 1998). According to Taylor the workers were involved in soldiering for three specific reasons: 1. they felt if only some workers worked at full capacity, others who did not do so would lose their jobs. So a feeling of solidarity towards their co-workers handicapped their obligation to work at a faster pace. 2. the implied system of "maximum production for minimum pay" imposed by management discouraged the workers from being more productive. 3. the working practices adopted by the workers were inherently inefficient. Taylor also believed that Midvale's management was not bent in determining the most efficient ways of tapping into the huge potentials of its workers. So in order to solve this conflicting situation between management and workers attitudes, Taylor devised a scientific approach to management, hence the name "scientific management".
  48. 48. 38 Time and Motion Study His scientific approach to management was based on the "time and motion study", which involved scientifically finding and timing the most efficient motions involved in each production task on the workshop floor. This study established, in a definite manner, how much each worker can do per day and therefore eliminated the workers' ability to engage in soldiering. In addition the study was useful in determining which worker was better suited for which task. Furthermore, in order to strengthen his time and motion study, Taylor insisted that: • standardised tools be used by all workers and these would be provided by management. • regular breaks be taken by workers to relieve fatigue. • a "differential rate system" be introduced. Differential Rate System Taylor encouraged management to introduce a differential rate system whereby workers who reached higher levels of productivity would benefit from higher pay, provided they exceeded a standard level of output. Again to discourage soldiering he assured the workers that if ever their peers were to fall behind and lose their jobs, they would quickly find new jobs elsewhere due to the prevailing labour shortage (Stoner, 1995). Taylor assumed that workers would be satisfied with higher payments while management will benefit from higher quantity and quality of output for future sales, therefore increasing profits. So Taylor's scientific management rested on specific principles. Taylor's 4 Principles of Scientific Management 1. Management should scientifically study each task and develop the best method for performing the task. 2. Management should scientifically select, train and develop each worker in order to ensure that each worker is suited for each task. 3. Management should cooperate fully with workers to ensure that they use the proper methods. 4. Management should divide work and responsibility in such a way that management is responsible for planning work methods and workers are responsible for executing these work methods. Source: Bartol et al. (1998)
  49. 49. 39 Scientific management contributed greatly to the spread of many factories in those days due to its revolutionary approach to increasing productivity and some of its principles are still of relevance today. In fact it was mostly scientific management that inspired Henry Ford to mass-produce the Model T car, so that most people could afford it. Scientific Management – Contributions: • Introduced a scientific approach to management. • Improved factory efficiency and productivity. • Used as a model upon which the creation of modern assembly lines was based on. • Allowed managers to reward workers for higher performance and productivity through the differential rate system. • Built a sense of co-operation between management and workers. However scientific management has also been criticised by many authors. Scientific Management - Limitations: • Limited by its underlying assumption that workers were primarily motivated by economic and physical needs. It therefore overlooked the desire of workers for job satisfaction. • Led, in some cases, to the exploitation of workers and it has been often suggested that scientific management was at the centre of many strikes prevalent in those days. • Excluded the tasks of management in its application. • Instilled an authoritarian leadership approach. • Focused only on the internal operations of the organisation. The theory of scientific management was further extended through the works of Frank and Lillian Gilbreth as well as of Henry L Gantt.
  50. 50. 40 Activity 1 Why did Taylor find it necessary to introduce a scientific approach to management? 2.3.2 Bureaucratic Management The concept of bureaucratic management was put forward by Max Weber, a German sociologist. Weber's need to establish a bureaucratic system of management stemmed from his exposure to nepotism whereby he saw that many people were being recruited in organisations based on personal contacts (and based on who they were) rather than on their competence. This practice, he believed, led to a great deal of inefficiencies in organisations. In the 1940s Weber published "The Theory of Social and Economic Organisations" in which he proposed a set of principles that managers should follow in order to make their organisations "ideal bureaucracies" - ideal because these organisations would be based on rationality, efficiency, consistency and fairness.
  51. 51. 41 Weber's Principles of Bureaucracy Principle 1 Specialisation of labour Description: Each job should have a set of specific and regular activities. This will ensure that each person in the organisation will know exactly what is expected of him/her and will also become an expert at what he/she does, through repeated task completion and regular training. It also ensures continuity in a job which has been handed over to a promoted or new member of the organisation. Principle 2 Formal rules and procedures Description: Written rules and procedures set by the organisation and which require strict adherence to. This will ensure that the organisation benefits from increased efficiency because all its members will have to perform their jobs according to these rules and procedures in a routine and unbiased manner. This will also reduce any scope for indolence and errors. It, for example, also involves strict application procedures for jobs in the organisation and hence the recruitment of competent people only. Principle 3 Impersonality Description: Rules, procedures and sanctions are applied uniformly throughout the organisation. This will ensure consistency and fairness in dealing with every member of the organisation regardless of any personal considerations. Principle 4 Well-defined hierarchy Descriptions: 1. The establishment of multiple levels of position in the organisation. 2. Authority is linked to specific positions in the management hierarchy. 1. This will ensure that relationships between each hierarchy are carefully defined and that each hierarchy is responsible for the one below it. Similarly each hierarchy should report to the one directly above it. Important decisions are however taken by senior managers found at the top of the hierarchical ladder. 2. This will ensure the efficient achievement of organisational objectives through the formal network of relationships among specialised positions. It is also considered as an efficient means of dealing with exceptional situations and establishing accountability of actions. Principle 5 Career advancement based on merits Description: Selection and promotion is based on the qualifications and performance. This will ensure that selection and promotion are done fairly and that only the most competent people are recruited. Source: Bateman & al. (1990), Stoner (1995), Bartol & al. (1998)
  52. 52. 42 It must be noted though that these principles were first applied to large organisations following the publication of Weber's book in the United States in 1947. Managers there were impressed by Weber's approach to management and were eager to apply them in their own organisations. However, as mentioned above, Weber's intention was only to provide managers with guidelines in order to increase the internal efficiency of their organisations. Weber's bureaucratic approach includes many contributions to management. In fact Stoner (1995) suggests that it is the bureaucratic model which has "advanced the formation of huge corporations such as Coca-Cola and Exxon". Bureaucratic Management - Contributions: • Ensured that the organisation would be operated and managed by qualified/high calibre personnel only. • Allowed many organisations to efficiently perform routine organisational tasks through job specialisation. • Allowed management and employees to be more objective in their judgement and approach due to rules and procedures for doing specific tasks being clearly set. • Placed emphasis on job position, specialised employees and job continuity thus providing the organisation with long-term perspectives and quality employees. • Surpassed the loss of any employee or even of any manager due to the nature of job specialisation. Hence in such a bureaucracy anyone can be replaced. But inherent to this approach are also many limitations. Bureaucratic Management - Limitations • Imposed a formal and structured chain of command which is not compatible with organisations that require flexibility and rapid decision-making. This is truer today where organisations are constantly faced with a turbulent external environment of increased competition. • Made employees feel insecure and replaceable. • Did not promote, again through its formal and structured chain of command, interpersonal relationships between subordinates and superiors and vice versa.
  53. 53. 43 • Often led to the abuse of power and control since only a few people in the hierarchy had authority. This, sometimes, resulted in authoritarian styles of management as well as autocratic styles of leadership. • Argued that bureaucracies are difficult to dismantle. Their nature is such that once they are institutionalised "they take a life of their own" (Bateman et al., 1990). Activity 2 In your own words list the advantages and disadvantages of adopting a bureaucratic approach to management. Advantages: Disadvantages:
  54. 54. 44 2.3.3 Administrative Management The concept of administrative management was initially put forward by Henri Fayol, a French mining engineer and industrialist when he published, in 1916, his managerial experiences in a monograph titled “General and Industrial Management”. Administrative management, as designed by Fayol, is based on two recommendations which should be applied to the organisation, by senior managers, in order to achieve superior levels of performance. These recommendations are as follows: Recommendation 1 – Fayol’s Five Managerial Functions Planning, organising, commanding, co-ordinating and controlling which relate to the four functions discussed in Unit 1. According to Fayol senior managers should be involved in carrying out these functions in order to ensure effective organisational performance. Furthermore, since he broke down the job of managers into specific functions, Fayol demonstrated that the ability to manage and become managers could be taught to individuals. Recommendation 2 – Fayol’s 14 Principles of Management 1. Division of work Work is divided in order to produce more and better work with the same effort. 2. Authority Managers must exert authority whereby they have the right to give orders, establish each employee’s degree of responsibility and the power to extract obedience. 3. Discipline Managers establish clear and fair agreements between the organisation and the employees. Managers should also judiciously apply sanctions. 4. Unity of command Employees should receive orders from one superior only. 5. Unity of direction Activities aimed at the same objective should be organised so that there is one plan and one person in charge. 6. Subordination of individual interest to the general interest Personal interests of managers and employees are secondary to the overall interests of the organisation. 7. Remuneration Compensation should be fair to both the employees and managers. 8. Centralisation The proper amount of centralisation or decentralisation depends on the situation. 9. Scalar chain A scalar (hierarchical) chain of authority which forms a chain of superiors, ranging from the highest ranking to the lowest ranking manager. 10. Order There is a place for everyone in the organisation and everyone understands his/her place. Order also applies to materials, which should be kept
  55. 55. 45 in well-chosen places, in order to facilitate activities. 11. Equity Employees should be treated with kindness and justice. 12. Stability and tenure of personnel Because time is required to become effective in new jobs, high turnover should be prevented. 13. Initiative Managers should encourage and develop subordinate initiative to the fullest. 14. Esprit de corps Harmony amongst all organisation members result in great strength. Fayol emphasised that these two recommendations be regarded as universal guidelines and be applied flexibly to the organisation. The scope of administrative management was further expanded through the effort of Chester Barnard, former president of New Jersey Bell Telephone Company. After many years of experience as an executive, Barnard published in 1938 “The Functions of the Executives”. Unlike Fayol, Barnard did not propose a list of principles; instead he argued that senior executives’ functions should include (Bateman et al., 1990): 1. Formulating the purpose and objectives of the organisation 2. Securing each employee’s effort in the organisation 3. Maintaining organisational communications These functions transpired in the form of the “acceptance theory of authority” which Barnard used to describe the perception which employees had for managerial authority. Acceptance Theory of Authority Barnard contended that communication, as opposed to authority, is more effective in ensuring that employees follow orders and directives. So regardless of the fact that orders and directives are communicated by superiors/managers in the hierarchy (hence “persons of authority”), Barnard explained these will only be followed if employees (Bartol & al., 1998): 1. Understand the orders and directives 2. See the orders and directives as consistent with the purposes of the organisation 3. Feel that the orders and directives conform with their needs and those of other employees 4. View themselves as mentally and physically able to comply with the orders and directives
  56. 56. 46 Barnard believed that this approach to management would nurture a willingness to co- operate and ensure a clearly articulated common purpose between managers and employees. Administrative Management - Contributions • Viewed management as a profession which can be trained and developed • Offered universal managerial guidelines • Promoted communication between managers and employees • Highlighted the needs of employees through unity of command, unity of direction, equity, and so on... • Encouraged employees to act on their own initiatives Administrative Management - Limitations • Fayol's recommendations are too experience biased and therefore not driven by formal research. Hence its concepts have not been tested. • Lacked consideration for organisation's environmental, technological and personnel factors, due the blind application of Fayol's concepts. (Bateman et al., 1990). Activity 3 How effective, do you think, are Fayol's principles in increasing organisational performance?
  57. 57. 47 2.4 BEHAVIOURAL MANAGEMENT APPROACHES As explained earlier the classical management approaches, and in particular scientific management, were criticised for being mechanistic and dehumanising in nature. Furthermore though the classical approaches looked at most functional avenues for increasing productivity and internal efficiency, none emphasised human behaviour in organisations. The behavioural approaches to management demonstrate that job satisfaction through effective leadership and motivation influences organisational performance. Behavioural approaches to management therefore attempted to understand the "human aspects" in organisations and the main contributions to this school of thought are: 1. The Hawthorne Studies 2. The Human Relations Movement 3. The Behavioural Science Approach 2.4.1 The Hawthorne Studies The Hawthorne studies were named so because they were conducted at the Western Electric's Hawthorne plant near Chicago. The management of the company hired a team of Harvard researchers led by Elton Mayo and Fritz Roethlisberger to find the main physical working conditions (starting with lighting) which might be affecting workers' efficiency and productivity. Three sets of studies were carried out and the first two are discussed below. Hawthorne Studies - Experiment 1 'The Illumination Experiments" - The researchers changed the lighting in the factory to assess the effects of different lighting conditions on productivity. However one group of workers - the control group - was kept in constant lighting conditions. They observed that: 1. The control's group productivity increased 2. Where lighting conditions were improved, productivity also increased 3. Where lighting conditions were deteriorated, productivity still increased As level of productivity was rising in an unpredictable manner, the researchers were baffled and decided to look for other physical working conditions that might affect productivity.
  58. 58. 48 Hawthorne Studies - Experiment 2 In this second set of experiments, five female workers were placed separately in a Relay Assembly Test Room and the researchers acted as supervisors. As a consequence the researchers were able to alter a number of work conditions whereby: 1. There were no formal supervisors present 2. Wages were increased and workdays and workweeks were shortened 3. The length of rest periods was altered and the group members were free to choose when to take them. As a result the workers were allowed to leave their workstations without permission. The workers were also given the opportunity to suggest other possible changes in their working conditions. A control group, which did not benefit from any changes, was also tested in order to compare findings between both groups. Once again the researchers found that productivity, in both groups, peaked after which it began to fall erratically. At this stage in the Hawthorne Studies, Mayo and his associates made their first contribution to the behavioural approach - namely the Hawthorne Effect. The Hawthorne Effect It is obvious that the only common element between the control group and the "five female workers test group" was the presence of the researchers. The researchers argued that since both groups of workers were being monitored closely and received special attention, they became more motivated than usual. This phenomenon of increased motivation to work harder, due to special attention, is known as the Hawthorne effect. So the researchers suggested that employees' behaviour and productivity are influenced by management's/supervisors' attitude towards them. The researchers also noticed that the social environment of the employees may lead to the formation of informal work groups which also have a considerable influence on productivity and output. Informal Work Groups Informal work groups refer to the associations and friendships which co-workers usually tend to develop when they want to resist management expectations of productivity and/or when they are unhappy with working conditions. These work groups usually have different norms and they are able to influence productivity by exerting pressure on individuals in the group, so that they can influence level of output.
  59. 59. 49 The Hawthorne Studies are regarded as a milestone in the behavioural movement. However many authors have branded the Hawthorne Effect as controversial [Stoner (1995), Bateman et al. (1990)]. In fact, according to Bartol et al. (1998), "More contemporary investigations now suggest that the Hawthorne-effect concept is too simplistic...and...defective". 2.4.2 The Human Relations Movement Although the findings of the Hawthorne studies were regarded as controversial, they nevertheless urged a shift towards the search for a better understanding of human behaviour. The human relations approach tried to encourage managers to move away from the belief that employees were motivated only by material and economic incentives and instead proposed that managers recognise the necessity of interpersonal processes as an important motivational mechanism for employees. Two important contributors to the human relations movement are: 1. Abraham Maslow for his "hierarchy of needs theory" which suggests that people are motivated by the need to satisfy a sequence of human needs, including physiological (the most basic needs), safety, social, esteem and self-actualisation. 2. Douglas McGregor for his "Theory X and Theory Y" which describe two opposing management views of employees. Theory X views employees as innately lazy and without ambitions, while Theory Y sees employees as motivated, hard-working and responsible beings. McGregor preferred the Theory Y management approach whereby he observed that job satisfaction increases employees' performance. This, he argued, is achieved by allowing employees to exercise responsibility and participate fully in the organisation.
  60. 60. 50 2.4.3 The Behavioural Science Approach Though the human relations movement has contributed to management approaches by highlighting the importance of motivating employees through job satisfaction, it has nevertheless been criticised for being based solely on theories rather than scientific evidence. Hence the behavioural science approach to management is based on scientifically developing and establishing theories about human behaviour in organisations which can be used to provide practical guidelines for managers. Researchers from diverse disciplines such as economics, psychology, sociology and even mathematics have joined their efforts in order to gain scientific knowledge about human behaviour. Many concepts pertaining to human behaviour and the organisation are tested in laboratory settings. Findings are then presented to management practitioners, who can apply them to their organisations. Activity 4 Based on your knowledge of the classical management approaches, list the major contributions of the three behavioural management approaches.
  61. 61. 51 2.5 QUANTITATIVE MANAGEMENT APPROACHES Quantitative methods were initially adopted during World War II when military planners began to apply mathematical techniques to defence and logistics problems. Executives gradually realised the importance and applicability of quantitative analysis to managerial decisions, organisational effectiveness and hence the industry as a whole. So, after the war, companies began to recruit quantitative experts who would be able to develop and enhance this revolutionary approach to management and decision-making. Nowadays, quantitative management includes, among other things, the application of statistics, mathematics, computer and information models to organisation activities. Quantitative approaches to management are applicable to many organisational functions such as: Production, Quality Control, Marketing, Finance, Distribution and Planning Quantitative management can be sub-divided into the following 3 main management styles: 1. Management Science 2. Operations Management 3. Management Information Systems 2.5.1 Management Science Management science is also known as operations research (OR). In OR, complex organisational decisions are made by using high-powered computers programmed with quantitative tools. OR is popular, for example, in new product development, where possible product models are simulated on computers and their features, cost of production, inputs and so on can be assessed.
  62. 62. 52 Management science has also contributed to the development of other quantitative tools which facilitate linear programming, forecasting, break-even analysis and hence help decision-making process. 2.5.2 Operations Management Operations management is used mainly to improve productivity and efficiency in production through the use of quantitative tools. Some examples of production logistics and activities which have been improved through operations management include inventory modelling, quality control and distribution. 2.5.3 Management Information Systems (MIS) Management Information Systems (MIS) involve a management approach geared towards the "collection, processing and transmission of information to support management functions"(Bovée et al., 1993). So organisations which apply MIS, design and implement computer-based information systems on different aspects of the organisation, including its customers and environment. Upon requirement such information can be rapidly retrieved and utilised. Activity 5 Compare and contrast the three quantitative management approaches.
  63. 63. 53 2.6 CONTEMPORARY MANAGEMENT APPROACHES As can be gathered above, classical, behavioural and quantitative management approaches tend to focus more on the internal workings of organisations. The contributions of each school's of thought are still being applied today. However both researchers and practitioners are now giving more attention to interaction of the organisations with their external environment. The contemporary approaches to management include: 1. The Systems Theory 2. The Contingency Theory 3. Japanese Management and Theory Z 4. Total Quality Management 2.6.1 The Systems Theory In the systems theory, organisations are seen as systems composed of a set of interdependent parts which co-ordinate their efforts in order to achieve common goals. Organisational systems operate on the basis of four elements (see Figure 2.1): 1. Inputs - the organisational resources, e.g. raw materials, human resources, financial resources, information and equipment. 2. Transformation processes - the conversion of inputs into outputs through managerial functions, technological operations and production activities 3. Outputs - the results of the transformation processes, which include profits/losses, goods/services and so on. Some of these outputs, like for example products and services, are returned to the environment for use by other organisations and individuals. 4. Feedback - the environment's reactions to these outputs are relayed back to the system.
  64. 64. 54 External Environment Figure 2.1: The Organisational System This approach allows managers to assess their organisation's interaction with the larger environment. Open System and Closed System An open system is an organisational system which interacts with its environment (as shown in Figure 2.1), whereas a closed system is one that does not do so and is therefore self-sufficient. However, in reality, an organisation cannot be a totally closed system because for survival, an organisation has to interact with its environment. The concept of open and closed systems is used as a continuum to assess the extent to which an organisation interacts with its environment. 2.6.2 The Contingency Theory Contingency theorists argue that each organisational circumstance is unique and as a result management approaches should be selected and applied based on the specific situation at hand. The contingency theory therefore supports the view that "there is no one best way to manage" and emphasises the use of any management approach - scientific, behavioural and quantitative - provided it is suited to the organisational situation and helps managers to manage more effectively. Inputs Transformatio n Process Outputs Feedback
  65. 65. 55 2.6.3 Theory Z Theory Z was put forward by William G. Ouchi after he studied the management practices of Japanese and U.S. firms which operated in both countries. Ouchi described the U.S. management approach as Theory A and the Japanese management approach as Theory J and integrated the successful practices of both to create the Theory Z. According to Ouchi's observations: Theory A typifies U.S. management approach as being geared towards: Theory J typifies Japanese management approach as being geared towards: 1. Short-term employment 2. Individual decision making 3. Individual responsibility 4. Rapid evaluation and promotion 5. Explicit, formalised control 6. Specialised career path 7. Segmented concern 1. Lifetime employment 2. Consensual decision making 3. Collective responsibility 4. Slow evaluation and promotion 5. Implicit, informal control 6. Non-specialised career path 7. Holistic concern Theory Z combined some of the U.S. and Japanese management approaches and is geared towards: 1. Long-term employment 2. Consensual decision making 3. Individual responsibility 4. Slow evaluation and promotion 5. Implicit, informal control with explicit, formalised measures 6. Moderately specialised career path 7. Holistic concern, including familySource: Bovée et al., 1993
  66. 66. 56 2.6.4 Total Quality Management The concept of quality control was initially put forward by the American W. Edwards Deming, following a visit he made to Japan, in 1950, to advise top Japanese managers on how to improve their production effectiveness. His contributions have been subsequently expanded into the Total Quality Management (TQM) concept - a management approach that "aims at achieving zero defects by involving all workers in striving to make a product or service conform exactly to desired quality standards" (Bartol & al., 1998). An important aspect of TQM is its emphasis on minimising costs through doing things "right first time". Activity 6 Discuss the advantages of contemporary management approaches over the classical ones.
  67. 67. 57 2.7 KEY CONCEPTS Scientific Management Soldiering Time and Motion Study Differential Rate Systems Bureaucratic Management Administrative Management The Hawthorne Studies Hawthorne Effect The Human Relations The Behavioural Science Quantitative Management Management Science/Operations Research (OR) Operations Management Management Information Systems (MIS) Systems Theory Open System Closed System Contingency Theory Theory A Theory J Theory Z Total Quality Management (TQM)
  68. 68. 58 2.8 VIDEO SESSION “Intransition: The Changing, Challenging Environment”: Episode 2 1. In what terms did Taylor define each worker’s task? 2. What is the legacy of Taylor’s work? 3. Why would people be “unhappy” if there was not a level of bureaucracy? 4. Bureaucracies were often compared to ______________ - ____________ machines. 5. What was the “one” major shortcoming of the classical management theories? 6. What is the economic order of today? 7. What advantages does “diversity” bring to an organisation? 8. Who are the stakeholders of a business? 9. What barriers do businesses have to break in order to survive in today’s competitive environment? 10. What attributes will the company of tomorrow have?
  69. 69. 59 UNIT 3 PLANNING Units Structure 3.0 Overview 3.1 Learning Objectives 3.2 Introduction 3.3 Planning 3.3.1 Benefits of Planning 3.3.2 Hierarchy in Planning 3.3.2.1 Strategic Plans 3.3.2.2 Tactical Plans 3.3.2.3 Operational Plans 3.3.3 Appellation for Plans 3.3.3.1 Statement of Objectives 3.3.3.2 Strategies 3.3.3.3 Policies 3.3.3.4 Procedures 3.3.3.5 Rules 3.3.3.6 Programmes 3.3.3.7 Budget 3.4 Objectives 3.5 Barriers to Planning: Why do organisations not Plan in Practice? 3.6 Forecasting 3.6.1 Methods of Forecasting 3.7 Summary
  70. 70. 60 3.0 OVERVIEW In Unit 3, we introduce you to organisational planning, decision-making and forecasting. We highlight the benefits of planning in organisations and explain the barriers faced by planners. The Unit describes very briefly the various forecasting techniques that are commonly used by managers. Note that this Unit contains a group activity. 3.1 LEARNING OBJECTIVES After you have successfully completed this unit, you should be able to do the following: 1. Define planning. 2. Identify what is involved in planning. 3. Distinguish the different types of plan. 4. Assess the nature and importance of objectives. 5. List the benefits of planning. 6. Explain what forecasting implies. 7. Compile the most commonly used forecasting techniques 3.2 INTRODUCTION Plans and decisions are essential requirements to organisational tasks and management. Business success depends significantly upon successful planning and decision making. In fact, the challenge of management today lies in how to score success in the planning and decision making exercise. Organisations rarely operate in a vacuum. They are in fact open systems with significant interaction with the environment. Managers are becoming increasingly aware of the effects of the environment on organisations. Had it not been for the turbulence that
  71. 71. 61 characterises today’s business environment, chances would have been better that activities would have proceeded as planned. The business environment is changing so rapidly that Drucker characterises this change as being irreversible. Resources - manpower, money, materials- are also getting scarcer and another challenge of management and the manager is how best to allocate these resources to survive and grow. This process calls for sound decision making and right allocation of resources. Unit 4 explains the major elements constituting the decision making process. Mistakes and errors can no longer be permitted in organisations as these involve wastage of resources and the organisation paying this off from its competivity. Thus, there is a need for making the right forecast and prediction about the future. Forecasting deals with this aspect. In Section 3.6, we deal with forecasting and highlight the major forecasting techniques available to managers. Now, let’s consider in more details the issues raised above. But before, complete the exercise below in the space provided. Warm up Activity Imagine a few instances when you have had to make certain plans. Jot down the major issues that crossed your mind about plans and planning from these experiences.
  72. 72. 62 3.3 PLANNING All of us have been involved in “planning” in one way or the other, at home, at work, in college, etc. We all have our own experience of what planning is about. Let’s try to understand first a definition of planning. Planning may be defined as… Deciding now what to do in the future given certain intended conditions This definition of planning incorporates three important elements that require attention: now, what to do, and future. First, the word now indicates present circumstances and the current state of affairs pertaining to an organisation. It must be appreciated that organisations do not operate in a vacuum and are in fact, with very few exceptions, open systems with constant and dynamic interaction with the environment. Environment scanning is therefore a pre-requisite for the planning process. Environmental scanning is commonly carried out through what is termed a SWOT analysis – the identification of strengths and weaknesses pertaining to the internal environment of an organisation and opportunities and threats that the external environment presents. The internal environment relates to those factors that the organisation can relatively control. The external environment that constitutes the PEST (Political, Economical, Social and Technological) factors is relatively remote from what the organisation can control. You will have an opportunity to study more about this in Strategic Management. The second important element in the definition is “what to do” or “what to achieve”. These are expressed in terms of a statement of objectives, also referred to as goals and
  73. 73. 63 targets. Put together planning is, therefore, a process that defines what the organisation aims to achieve at some point in time. The process produces what we commonly call plans. There are different appellations that are given to the output of the planning process. These are briefly described in the next Section. The third element that the definition of planning includes is the future. The future may be any time that succeeds now, that is the next second or a fraction of it, the next minute, hour, week, month, year, four years, ten years, etc. The future is basically characterised by uncertainty and uncertainty involves risk. Expressed differently, the future is quite unpredictable and the more we go into the future, the more it is difficult to predict what it is going to hold that in turn implies the more risk one has to take. It is particularly because of the uncertainty that rests with the future that there is a need for plans to be flexible. Flexibility provides some leeway to take care of changing situations and circumstances. To be meaningful, plans must necessarily be put into action. Effective planning therefore requires an effective and efficient process of coping with the uncertainty and risk of the future to enable achievement of organisation’s objectives. Expressed in other terms, planning takes care of defining from “what business we are in” to the nitty gritty of how in detail an organisation fulfils its day to day operational tasks, its medium and long term objectives. Expressed more briefly, planning involves → Objective – setting, that is, What an organisation wants to achieve. → Environment scanning, that is, assessing internal strengths and weaknesses and anticipating external opportunities and threats → Decision making, that is, what to do, how to do it, when to do it and who should do it.
  74. 74. 64 In essence, Planning: - gives direction; - enables predictability; - enables adaptation to changes without crisis. Activity 1 (a) State the major changes that you believe are affecting today’s business environment. (b) Give some examples of unexpected risks that may crop up in managing an organisation. 3.3.1 Benefits of Planning There are several benefits that an organisation may derive from initiating and organising planning exercises and processes. A few of these benefits are listed below:- Planning:- (a) helps to prepare for unforeseen eventualities (b) helps to clarify objectives (c) helps to develop criteria for monitoring performance
  75. 75. 65 (d) helps to think ahead systematically (e) demands conscious co-ordination of projects and active participation and co- operation of subordinates (f) eases accommodation of change (g) helps to identify opportunities for greater efficiency (h) reveals duplication of effort, bottlenecks in workflows and foreseeable pitfalls (i) assists in integrating activities (j) helps to take decisions unhurriedly, using maximum or optimum information Activity 2 Write down an example from your experiences to illustrate four of the benefits that may result from planning. 3.3.2 Hierarchy in Planning Plans that emanate from different levels (hierarchies) of an organisation have different connotations and are commonly referred as (illustrated in Figure 3.1): • Broad long-term strategies • Medium term tactics and policies • Short term operational budgets and schedules
  76. 76. 66 The planning process typically produces several types of planning documents: strategic plans, scenario plans and operational plans. 3.3.2.1 Strategic Plans Strategic plans help identify and communicate the mission of the organisation. There is usually at least one strategic plan in each planning document hierarchy. They deal with fairly broad groups of organisational stakeholders including employees, customers, shareholders, suppliers and the community. Objectives are normally only broadly defined in strategic plans. 3.3.2.2 Tactical Plans Tactical plans support strategic plan implementation and focus on intermediate time frames usually 1 to 3 years. Generally, they tend to be more specific and concrete than strategic plans. They are normally developed by middle managers who may consult lower-level managers to develop steps to reach tactical goals. ORGANISATION HIERARCHY PLANNING Top management Broad long term strategies Middle or tactical management Medium term tactics and policies Functional or Operational management Short term operational budgets and schedules Figure 3.1: Hierarchy in planning
  77. 77. 67 3.3.2.3 Operational Plans Operational Plans specify how to accomplish the objectives defined broadly in the strategic plan. There are typically several operational plans in the planning document hierarchy. Operational plans should be checked for consistency and completeness with the strategic plan from where they originated. Objectives become more observable and measurable. There are two main types of operational plans: single-use plans and standing plans. 1. Single-use plans are suited to situations that are not likely to be repeated often, like the acquisition or divestiture of a new business or a move to new premises. Single-use plans usually include time-phased milestones, specific assignment of responsibilities, and a project budget. 2. Standing plans are suited to on-going operations and processes. The Human Resource process of justifying and hiring new employees and effluent control protocols in a river are examples of ongoing operations. Standing plans usually include policies, procedures, budgets, etc. 3.3.3 Appellation for Plans There are different appellations that have been given to plans or to the output of the planning exercise. These are briefly explained here. 3.3.3.1 Statement of Objectives Statement of objectives takes the shape of, for example: • Corporate mission • Strategic, tactical and operational plans
  78. 78. 68 3.3.3.2 Strategies Strategies are statements of purpose to achieve a desired end: • Follow on from determination of long-term goals and objectives. • Plan for the allocation of resources to achieve objectives. 3.3.3.3 Policies These are general statements of understanding which provide guidelines for management decision-making and enable managers to exercise discretion and freedom of choice within certain acceptable limits. Some examples include the following: → Promote a manager from within the organisation wherever possible, instead of recruiting from outside. → Encourage all recruits to improve academic qualifications. → Grant loans to individuals fulfilling certain criteria of credit worthiness. 3.3.3.4 Procedures A procedure is a chronological sequence of actions necessary for performing a certain task. For example there is a procedure for handling employee grievances and complaints or for banking money earned from sales. 3.3.3.5 Rules Rules are specific, definite courses of action that must be taken in a given situation. Rules do not provide for deviations, exceptions, or exercise of discretion (unlike policies). For example, the rules that exist regarding the hours of work, rate of pay, etc.
  79. 79. 69 3.3.3.6 Programmes A programme is normally a co-ordinated group of plans (goals, policies, procedures, and budgets) for the achievement of a particular objective. For example, a training programme that an organisation plans for its employees. 3.3.3.7 Budget A budget is a plan for carrying out certain activities within a given period of time in order to achieve certain objectives. Budgets indicate (in numerical terms) resources allocated to each department or activity in order to carry out planned activities. Production and marketing budgets are good illustrations. Activity 3 Think of an organisation of your choice. List down the major elements that go in each of the following department budget: production, human resource and marketing.
  80. 80. 70 Figure 3.2 Activity 4 1. If you were Jack, what information would you require to answer the question from the Chairman, that is, “what are your budgeted production figures for this year”? 2. What are the possible implications for the Marketing, Human Resource and Finance Manager? What are your targeted production figures for this year, Jack? Chairman Marketing Manager Finance Manager HR Manager Production Manager (Jack)
  81. 81. 71 3.4 OBJECTIVES As explained earlier, the planning process results in a definition of objectives that an organisation desires to achieve. Objectives are important in the learning process and are equally important in motivating employees. When you take care to define your objectives, you are in a better position to know: → how to adjust your behaviour; → how much effort to put in towards achieving your objectives; → whether you have succeeded or not. For objectives to be meaningful, they have to be set in such a way that they are: ♦ Specific as far as possible This will help to set clear guidelines at what is desired to be achieved. For example a stated objective of “we have to increase sales by 10%” is more meaningful and provides more direction than when the same objective is stated in terms of “we have to increase sales”. ♦ Time bound Again, when there is a limit set to the time over which it is desired to achieve a certain objective, the latter becomes more meaningful and helps to clear ambiguities. For example, the objective “we have to increase sales by 10%”, has a different meaning if we add to this “we have to increase sales by 10% this year or this month etc.”

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